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Data Sufficiency

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by vijeshimchandran » Mon Oct 21, 2013 5:58 am
On January 1st Thomas deposited $2,000 into an interest bearing checking account. If he made no withdrawals, what was the total amount Thomas had in the checking account on December 31st of the same year?

i. Thomas deposited an additional $4,000 throughout the year
ii. The checking account earned 7 percent simple interest
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by sahilchaudhary » Mon Oct 21, 2013 6:13 am
1 is not sufficient as interest rate is not given.

2 is not sufficient as it is not given whether the interest is per month or per annum.

Both 1 & 2 also cant give the answer.

So, the answer is E.

What is the OA ?
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by mevicks » Mon Oct 21, 2013 6:15 am
vijeshimchandran wrote:On January 1st Thomas deposited $2,000 into an interest bearing checking account. If he made no withdrawals, what was the total amount Thomas had in the checking account on December 31st of the same year?

i. Thomas deposited an additional $4,000 throughout the year
ii. The checking account earned 7 percent simple interest
Given:
Initial amount : 2K
Type of account : Interest bearing Checking account
No withdrawals made during the year

Q: Total amount in the account on Dec 31st?

St1: Total amount = 2K + additional 4K
But since its an interest bearing account we dont know the interest amount earned.
INSUFFICIENT

St2: We only know about the interest rate but no info about the amount deposited throughout the year.
INSUFFICIENT

St1+St2:
Total = 2K + additional 4K deposited
No withdrawals
Interest = 7% .. p.a ? or p.month or quarterly ?
We dont know when the interest amount is credited into his account, thus INSUFFICIENT

[spoiler]Answer : E[/spoiler]

P.S. Please post DS questions in the math forum, this forum is used by the OFFICIAL GMAT representative to answer TEST related issues.
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by vijeshimchandran » Tue Oct 22, 2013 6:25 pm
Thanks for the reply. But I am still confused,
Please confirm the below:

To check Stat2:

1. In Question they haven't mentioned or hinted anything about amount deposited through out the year.

2. Simple Interest is normally for 1 year until and unless specified.
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by mevicks » Tue Oct 22, 2013 7:50 pm
vijeshimchandran wrote: To check Stat2:

1. In Question they haven't mentioned or hinted anything about amount deposited through out the year.
It should be explicitly mentioned that "he made no deposits" as they have mentioned "made no withdrawals"
See OG13 DS#143 for an example of the wording you could expect on the GMAT


2. Simple Interest is normally for 1 year until and unless specified.
On the GMAT problems you cannot assume things and bring outside knowledge into the question; all the facts are always specified if you look closely.

There could be a possibility where the account earns the interest after 6 months! So essentially with no extra deposits made our guy would have earned interest amount twice in a year. There is no hard-and-fast rule that says simple interests have to be credited annually only.

eg: $2,000 --> 10% simple interest credited per month --> every month he earns an interest of $200 and after 12 months or a year he would have 12*200 = $2400 as the interest amount --> total = 2400+2000 = $4600 after a year
This would be different for Compound interest as we would then consider the "interest on interest" too.

These are some simple interest problem examples from the OG13 Diagnostics Test:
Diag #40 ... invested for one year at p percent simple annual interest
DS #25 ... percent simple annual interest and a different amount at y percent simple annual interest
DS #77 ... this amount earned simple annual interest at the rate of x percent per year,

As you can see they have always mentioned the word annual!
Apart from that here are my 2 cents ...

Basically solving more and more problems from the OFFICIAL source would help you catch such nuances. Not all test companies provide quality questions so your source of practice does matter :)

Hope that helps.
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by lunarpower » Thu Oct 24, 2013 3:20 am
This problem has issues. (Not surprisingly, the source isn't listed.)

As others have pointed out, the time period of the interest rate must be specified. (Most financial interest rates are expressed in annual terms, but certainly not all. Credit card advertisements express them per year, but credit card statements express them per day. Lots of other things express them per month or per quarter.)

There's also another problem, which is that there could already have been money in the account!
The problem just says that "Thomas deposited $2,000 into an interest bearing checking account". Ok, fine. But what if it's an account that Thomas has owned for 20 years and that already contains thousands of dollars? Nothing here to rule that out.
In fact, the current wording (deposited into an account -- not "started an account" or "opened an account") suggests that the account already existed before Thomas put the money into it.

Stick to reputable sources, guys. (And, needless to say, if you don't know the source at all, don't use the problem.)
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